Well, I wasn’t surprised that stocks were down yesterday after breaking below January 2018’s highs, BUT I was surprised at how big the drop was. I think the S&P-500 was down more than 4%, if my memory serves.
Increased volatility means greater risk to most investors, except those like Warren Buffet who bought so advantageously that they don’t really care. For our methodology, however, this will likely mean that we reduce our allocation to the S&P-500 early next week. Our methodology does not purport to predict the future; it allocates among asset classes based on recent market behavior.
Fortunately, we went into yesterday with 35% of our model in cash. Our gold, miners, and US TIP’s were either up or flat on the day, so we were not badly hurt.
I’ll be very interested to see if stocks hold here while people sort things out, or continue the crash behavior that occurred yesterday.